Giving retirement a second thought?

Over a third of OVER-55s think they will work beyond their state pension age.

We are witnessing a surge in the number of people giving retirement a second thought due to inflation rates and the cost of living crisis. Not only are more individuals looking to work beyond their State Pension age, but some are returning to employment after retiring due to increasing financial pressures.

Over 2.5 million people aged 55 and over will be impacted by the long-term effects of financial insecurity and think they will continue to work past their State Pension age. Additionally, half of those aged 55 and over don’t believe their pension is enough to fund their retirement, a new survey has revealed[1].

Increasing cost of living

Nearly four in ten over-55s who are not retired anticipate having to work past their State Pension age due to the increasing cost of living. Financial concerns surrounding retirement funding are the top drivers behind working beyond State Pension age.

A quarter (23%) are uncertain of how long their retirement savings will last, and almost one-fifth (18%) admit to not having made any preparations for when they stop working.

Ability to remain employed

Nearly half (46%) of the millions of older workers expecting to work past their State Pension age are apprehensive that doing so will mean they can’t enjoy their later years.

Health, too, is another major concern, with nearly half (45%) worrying their health will deteriorate as a result of having to continue working and more than a third (35%) concerned it will affect their ability to remain employed.

Heavy financial strain

Worryingly, 16% are concerned about being treated differently or worse at work because of their age and the same number worried about not being able to spend enough time with their family due to work commitments.

Looking ahead, the older workforce is expected to be crucial to the UK’s economic recovery as it will help ease severe labour shortages, yet this warning sign points to heavy financial strain many are facing.

Source data:
[1] Survey conducted by Opinium among 2,000 UK adults between 21–25 October 2022.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

Rising prices can wipe years off retirement pots

How to protect your pension income against inflationary pressures.

For anyone feeling the effects of rising inflation rates, it’s important to ensure that your retirement fund isn’t significantly impacted. While this can be challenging in such an uncertain economic climate, there are measures you can take to ensure that your savings don’t suffer.

Here are some tips to help you protect your pension income for the future.

Postponing retirement

Retiring later can have multiple advantages. It can be a financially wise decision to postpone retirement when inflation is high. Postponing retirement also gives you more time to invest and contribute funds towards your pension pot, allowing you to enjoy a larger sum of money when you eventually retire. Additionally, individuals who choose to retire later can benefit from longer periods of regular income which can be used for extra retirement savings to combat the impact of inflation in retirement.

Furthermore, delaying retirement will allow you to better prepare for future financial commitments such as mortgage repayments and other cost of living outgoings. If appropriate, by postponing your retirement you can make sure that you have the financial security and peace of mind needed for a comfortable retirement.

Consider where your pension is invested

When inflation rates are high, it’s important to take steps to ensure that your retirement savings aren’t adversely affected. Not only will this give you peace of mind about the future value of your pension pot, but it may also prove to be financially rewarding in the long run. One of the most effective ways to do so is by diversifying your investments and spreading out your money across different asset classes.

Having a diverse portfolio can help protect you from losses due to market volatility or inflation and provide access to a broad range of investments while reducing risk. Keeping track of these fluctuations enables you to plan ahead and adjust your investment strategy as necessary. By taking all these factors into consideration, you can ensure that your retirement savings are secure even in a period of high inflation.

Keep contributing

Despite inflationary pressures, continuing to contribute to your pension pot can be a wise decision. Not only is your retirement fund likely to outperform cash savings, but it also allows you to take advantage of the tax relief top-up on contributions offered by the government.

The amount of relief you receive is based on the rate of Income Tax that you pay. If you are in the highest rate Income Tax bracket you can claim additional relief through your self-assessment tax return, enabling you to save even more for your retirement. However, depending on how your pension scheme works, if you don’t pay tax you might not receive tax relief.

Already withdrawing a pension

For those with a defined contribution pension who are already taking an income, it might be beneficial to reduce the amount you are withdrawing in order to keep more of your pot invested. This strategy can help protect your retirement fund against volatile markets and rising inflation levels as the fund manager will monitor the investment performance, making necessary adjustments.

Those with a defined benefit pension need not worry about adjusting for inflation as this is taken care of automatically.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

Goals don’t just happen, you have to plan for them

How professional financial advice benefits both you and your family.

When it comes to managing your finances, the wealth of resources now available can make it easy to try and go it alone. However, obtaining the right advice from a qualified professional financial adviser will ensure you are able to plan ahead by including expectations for items such as inflation, market declines and your protection requirements, so you can stay on track.

Receiving professional advice is one of the main advantages of working with a financial adviser. Without obtaining this advice, there may be risks that you are disregarding. Emotional factors also have an influence on financial decisions and these can cloud our judgement, causing us to make illogical or irrational choices.

Achieving your goals

This includes confirmation bias, when we seek out information that reinforces an existing belief, which can lead to overconfidence in investment decisions. Your financial adviser will help provide objectivity and identify any possible risks you may not be aware of.

Having financial goals is also one of the main reasons to obtain advice. Whether it’s planning for retirement or another objective, having an experienced professional by your side can help you create and execute an investment plan tailored to achieving your individual goals.

Successful investment portfolio

If you are planning for your retirement, you now have more choices than ever before. While this offers numerous opportunities, it also means that careful consideration and knowledge of pension allowances, tax-efficient savings and other factors have become essential in order to ensure a comfortable retirement.

Knowing what assets you hold and having a clear strategy is key to creating a successful investment portfolio, but these portfolios can become complicated over time. For example, you may have investments with several different providers, overlapping funds or funds that don’t align with your goals any longer.

Start minimising taxes

In such cases, it may be beneficial to bring all of your investments together and simplify the portfolio. Your adviser will help you do this, as they will be able to construct a streamlined portfolio with a clear strategy suited to your specific needs and risk tolerance.

When it comes to wealth building and preservation, tax planning is key. Investing within an Individual Savings Account (ISA) can be a way to start minimising taxes. However, there may be more complex strategies available that could further reduce the amount of taxes you have to pay. That’s where professional advice, if appropriate, will ensure you are able to maximise your tax savings by taking advantage of alternative sophisticated strategies.

Providing invaluable guidance

In addition, to maximise potential returns within your risk appetite, it will be appropriate to look beyond domestic stocks. When managing your own portfolio, you may sometimes be guilty of suffering from ‘home bias’, which involves over-investing in local stocks at the cost of international ones. Your financial adviser will help you to use the full breadth of investment opportunities and make sure that you are getting the best potential returns.

If you have recently come into a large sum of money, it can be difficult to know what to do with it. Your financial adviser can provide invaluable guidance in this situation and help you make the right decision. You’ll have many questions such as should the money be invested or used to pay off your mortgage? Will there be tax implications? And is it best to invest all at once or over time? It’s important to remember that tax treatment varies according to individual circumstances and is subject to change.

Complex financial matters

Your adviser will be able to assist you with these decisions, ensuring that you get the best possible returns and maximise your wealth in the long term.

When it comes to complex financial matters, receiving professional financial advice is important. For instance, the introduction of the Lifetime Allowance means that investors must now be aware of how much they accumulate in their pension accounts, or risk facing an excess tax charge. With expert guidance, you can plan accordingly and make sure that your retirement goals are met without risking a substantial tax bill.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.

A PENSION IS A LONG TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND ON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

We are delighted to announce Gary Hanley's appointment as Director

We are pleased to announce that Investing For Tomorrow team member, Gary Hanley, has been appointed to our board of directors.

Gary joined the company in October 2017 as our Senior Paraplanner where he very quickly became a very important member of Investing For Tomorrow. He soon went on to achieve his Chartered Financial Planner status and we are delighted to welcome him to the board alongside Laurence and Toby.

When asked for a few words, Gary responded:

“Anyone who knows me knows I am not one for a big fanfare or long speeches! But above all, I am a family man and what I love about Investing For Tomorrow is the family ethos that runs through the company. I remember sitting-in on one of Laurence’s meetings when I joined the company. When a new client agreed to engage us as their Financial Advisers he shook their hand and said “welcome to the IFT family”. For me this is at the heart of Investing For Tomorrow. It is this ethos that makes staff members, and clients, feel like they are valued individuals and not just a number like you can sometimes feel with larger multinational companies.”

Managing Director Toby Turner added:

“Gary has a very keen eye for compliance and has worked very closely with the existing Directors to ensure that we remain fully compliant with each and every facet of the FCA regulations as they change from time to time. He has consistently helped us to push the business forward on several fronts. It was a natural progression for him to be appointed a Director and we are thrilled to have him join us on the Board.”

We are confident that with Gary’s help, Investing For Tomorrow will continue to grow and embrace any new challenges ahead. We are proud to welcome Gary to the board of directors to help steer the ship.

Financial jargon

7 out of 10 adults are puzzled by financial matters lingo.

Being informed about financial matters is essential to making sound decisions and staying in control of your money. Unfortunately, many people feel confused by the jargon used in financial discussions and services.

A recent study of UK adults reveals that seven in ten feel puzzled by financial jargon, while three-quarters don’t understand the concept of ‘the economy’[1]. Those aged 18-24 are the least likely age group to be confused by financial terms, with only 52% feeling puzzled compared to 69% across all age groups.

Most at a loss

However, younger respondents admit to being the most at a loss when it comes to managing money. 58% of those aged 18-24 confess they are perplexed by this task, compared to only 23% of people aged 55 and over.

The study revealed that younger people are also less likely to have heard of financial products and terms, which could explain why those aged 18-24 are the least confused by financial jargon. The survey also found that only 61% of 18-24s have heard of the term ‘pension’ compared to 97% of respondents aged 55 and above.

Financial terminology

In addition, only a quarter (25%) of 18-24s know about ‘contents insurance’ whereas almost all (92%) of those aged 55+ have heard this phrase. Furthermore, less than three-fifths (57%) of 18-24s recognise the term ‘inflation’.

The results suggest that although younger respondents may not be as confused by financial terminology as other age groups, they may lack understanding when it comes to some key financial products and money management skills.

Lack confidence

Despite having heard of some key investing terms, many people lack confidence in understanding what they mean. Just 43% of those who have heard the term ‘gilt’ know its meaning and only 59% of those aware of an ‘annuity’ feel confident in its definition. Similarly, 61% of people who have heard of an ‘ESG fund’ are comfortable with its meaning.

Many people find financial matters confusing and it can be easy to avoid the things we don’t understand. However, once these matters become clear, it can lift a huge weight off our shoulders.

Source data:
[1] The research was carried out by Ipsos UK on behalf of Aviva. Ipsos UK interviewed a representative quota sample of 2,379 adults aged 18+ in the United Kingdom using its online i:omnibus between 1–3 November 2022.

call: 01422 349 131

email: info@iftwm.com

Month: April 2023